How to Save For a House Deposit When You’re in Your 20s
Your 20s are a time to enjoy yourself and try new things, but it’s never too early to think about the future. With house prices on the rise, wannabe homeowners are needing bigger and bigger deposits, which means you’ll need longer to save. However, even if you can only afford to put away a little bit a month, it all helps. Here are some hints for 20-somethings who want to get on the property ladder.
Set yourself a target
Many young people may have a rough idea about house prices, but not realise just how much they’ll need to save as a deposit. In the UK, the average first time buyer puts down 17% as a deposit, although there are schemes such as Help to Buy which mean you can put down less. Those who lenders deem as risky will usually need a bigger deposit, so if you’re looking at bad credit mortgages, you may need to save a few percent more.
In addition to saving your deposit, you’ll also need to consider legal fees, moving costs, and other expenses. You can then set yourself a target, which may seem like a huge number at first, but will give you something to work towards.
Draw up a budget
It’s amazing how many 20-somethings don’t have a budget, and simply don’t know how much they have left over each month. Sit down and make a spreadsheet with everything you have coming in, versus how much is going out. You can then look at areas where you might want to rein in your spending. It doesn’t mean you have to be boring, it simply means having more control over your money.
Shop around for savings accounts
Savings accounts won’t earn you a huge amount of interest at the moment, but by putting your money in an account, you remove a little of the temptation to spend it. Many saving plans such as ISAs give a higher rate of interest, and penalise you if you make withdrawals, so you won’t end up emptying your account on a night out. Some banks offer a savings account that’s linked to your current account, but the disadvantage is that you often don’t get a very good rate. When it comes to savings, it’s better to be a disloyal customer and shop around.
Learn about investments
If you want to make your money work for you, and don’t mind taking on the risk, then investing can be a quicker way to save. It’s important to get independent financial advice, and make sure you do your research, but investing some of your savings may help you work towards your target faster.
Ask for cash gifts
Next time you’re celebrating your birthday, or even planning your wedding, ask for cash gifts instead of presents. Many gifts don’t last for long anyway, whereas putting the money in your account will help towards your future. Another option would be to ask for practical gifts such as clothes, and then saving the money that you’d usually spend on them, tucking it away in your savings account.
While saving a deposit might feel like an unachievable task, there are ways that you can put money aside in your 20s. It’s just a case of being careful, while still having fun, and ensuring you aren’t tempted to splash out. Even a little bit of money put aside each month will soon grow, and you can finally feel good when you open your bank statement.